Elevated inflation leads to negative growth in real rural wages: Economic Survey

While the survey is painting a positive picture about Indian economy recovering from the pandemic and its expected growth, rural wages do not seem follow the same trajectory

Updated - January 31, 2023 09:55 pm IST

Published - January 31, 2023 09:54 pm IST - New Delhi

Image used for representational purpose only.

Image used for representational purpose only. | Photo Credit: Mustafah KK

There has been nominal increase in rural wages but when calculated against the rate of inflation, the real rural wages have had a negative growth, the Economic Survey that was tabled in Parliament on Tuesday revealed.

While the survey is painting a positive picture about Indian economy recovering from the pandemic and its expected growth, the rural wages do not seem follow the same trajectory. The survey noted that there was a nominal increase in rural wages. 

In agriculture, the year-on-year rate of growth of nominal wage rate in agriculture was 5.1% for men and 7.5% for women, during the period April-November 2022. In non-agricultural activities, the growth of nominal wage rates was 4.7% for men and 3.7% for women, during the same period.

“However, growth in real rural wages has been negative due to elevated inflation. Going forward, as inflation is expected to soften with the easing of international commodity prices and domestic food prices, it is expected that this will translate into a rise in real wages,” it explained.

The nominal wage is simply what an individual receives for their work. The real wage is calculated by how this sum changes in response to the changing inflation rates.

Positive signs of recovery

There are though other positive signs of recovery in the rural economy, the survey has stated, including the decline in monthly demand for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) work. The survey credited this decline to “normalisation of the rural economy due to strong agricultural growth and a swift bounce-back from COVID-19.”

The MNREGA activists though do not agree with this assessment claiming that the demand has been artificially suppressed due to budget constraints put by the government. In FY23, as on 24 January 2023, 6.49 crore households demanded employment under MGNREGS, and 6.48 crore households were offered employment out of which 5.7 crore availed employment

Importantly, the survey notes that the number of works done under MGNREGS has steadily increased over the years, with 85 lakh completed works in FY22 and 70.6 lakh completed works so far in FY23 (as on January 9 2023). 

Particularly, it points out that there has significant jump in the share of “works done on individual’s land” which has been permitted since 2009 from 16% of the total completed works in financial year 2014-15 to 73% in FY 2022-23. These works include creating household assets such as animal sheds, farm ponds, dug wells, horticulture plantations, vermicomposting pits and so on, in which the beneficiary gets both labour and material costs as per standard rates.

“Empirically, within a short span of 2-3 years, these assets have been observed to have a significant positive impact on agricultural productivity, production-related expenditure, and income per household, along with a negative association with migration and fall in indebtedness, especially from non-institutional sources. This has long-term implications for aiding income diversification and infusing resilience into rural livelihoods,” the survey noted.

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